Currency and Economy News

Welcome to MoneyTransferComparion’s economy and currency news section. Our expert economist will be happy to provide you with a free overview of the most interesting things that happened last week in the world of currencies, as well as a prediction for next week’s happenings.

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Date of publication: May 13, 2019 | Author: Tim Clayton

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Last Week’s Summary

World Economic News Review

US-China developments dominate

Following President Trump’s unexpected announcement that tariffs on China’s exports to the US would be increased to 25% from 10% on May 10th, trade issues dominated during the week.

The US Administration insisted that China had backtracked on earlier pledges and tensions remained extremely high.

Equity markets declined sharply and there was a flow of funds into defensive assets such as the yen and Swiss franc. In contrast, currencies exposed to trade such as the Australian dollar declined sharply. The Chinese yuan also declined sharply over the week.

There was an element of relief that the China delegation did not cancel their planned talks with the US in Washington and talks took place on Thursday and Friday.

There was no last-minute deal and the tariff increases on existing categories went into effect while Trump also ordered the Trade Department to prepare tariffs on all other Chinese export categories. There was some relief that a complete breakdown in talks was avoided.

The dollar gained an element of defensive support with a flow of funds into Treasury bonds.

There was, however, also increased speculation that trade disputes would damage the US economy and also increase the potential for the Federal Reserve to cut interest rates later in 2019.

US

Consumer prices increased 0.3% for April with prices boosted for the second successive month by higher energy prices. The increase was slightly below consensus forecasts with the year-on-year rate edging higher to 2.0% from 1.9% while the core inflation rate increased slightly to 2.1% from 2.0%.

Given benign inflation data, there were also expectations that inflation data would not block a rate cut if the economy deteriorated.

UK

UK GDP data met consensus expectations while the industrial data was stronger than expected, although there was very little impact from the releases.

There were also no substantive political developments during the week. Brexit talks between the government and Labour Party continued, but there was a lack of energy surrounding the negotiations.

Euro-zone

The Euro-zone data recorded an increase in investor confidence to 6-month highs and there were slightly increased expectations of a recovery in the economy as German output and orders also registered small gains.

Trade tensions were, however, very important and Euro-zone protection from the strong current account surplus had a larger impact in supporting the currency.

International

The Reserve Bank of Australia maintained interest rates at 1.50% following the latest meeting. There was, however, a relatively dovish stance in the statement which suggested an increased risk that the bank would cut later in the year.

Australian data also beat market expectations with a strong trade surplus, although global developments tended to dominate market sentiment.

The Reserve Bank of New Zealand cut interest rates to a record low of 1.50% from 1.75% with the bank uneasy over the threats to global trade given the US-China tensions. The bank stated that the outlook was uncertain with a balanced outlook on rates over the next few months.

Canadian labour-market data was much stronger than consensus forecasts with a record monthly employment increase of over 106,000 for April while unemployment declined to 5.7% from 5.8% which supported the Canadian dollar.

Next Week’s Forecast & Events

a Men Looking at Economic Forecast

Trade talks will remain extremely important

Following dramatic developments last week, trade issues will remain in focus during the week ahead. The US went ahead with the threat to increase tariffs on Chinese exports, but talks did not collapse.

If dialogue continues and there is another round of talks, overall fears should be contained. It is also important to note that tariffs would only apply to goods once they reach the US and there is a lead time of several weeks given shipping times from China.

There will, however, be another spasm of fear if tensions intensify or there is evidence of aggressive retaliation by China with renewed gains for assets such as the Japanese yen.  

Latest Chinese industrial production and retail sales data is due on Wednesday after stronger than expected data last month.

US

The latest retail sales data is due on Wednesday after strong data for March. The business confidence data will be watched closely with the New York Empire survey on Wednesday and Philadelphia Fed data on Thursday.

Comments from Federal Reserve speakers will be monitored closely to assess whether there is any shift in momentum towards a cut in interest rates over the next few months. In particular, comments from Governor Brainard will be important on Thursday to assess whether there is likely to be any change in the message from a patient stance.

UK

The latest labour-market data will be released on Tuesday with the main focus on average earnings. The overall impact should still be limited unless there is very strong data with the Bank of England on hold.

Political developments will be monitored closely with talks between the government and Labour Party continuing. Prime Minister May is also likely to give further details of her resignation timetable plans. There will be strong pressure for the government to secure some sort of breakthrough before the May 23rd EU elections.

Euro-zone

The German GDP data is due on Tuesday and ZEW business confidence data later in the day. ECB commentary will also be monitored, although trade developments are likely to dominate market moves for the week.  

International

Canadian inflation data is due on Wednesday after a slightly than stronger than expected release last month and strong employment data on Friday. Expectations surrounding the Bank of Canada interest rate policy could shift if there is stronger than expected data.

Australian labour-market data will be watched closely on Thursday, especially as the Reserve Bank is monitoring jobs data closely in determining its monetary policy.

The Australian General election will also be held on May 18th with opinion polls suggesting the opposition Labour Party will win the most number of seats.

Currency Forecast for Next Week

Currency pairSpot 1-week forecast1-month forecast
EUR/USD1.1231.1251.135
USD/JPY109.8110.2109.0
EUR/GBP0.8650.8680.852
GBP/EUR1.1571.1521.202
GBP/USD1.2991.2961.332
AUD/USD0.6990.7030.713
USD/CAD1.3431.3481.333
USD/SGD1.3631.3611.352
USD/HKD7.8487.8507.845
NZD/USD0.6590.6640.680
GBP/JPY142.6142.8145.2
GBP/AUD1.8581.8441.868
GBP/NZD1.9711.9521.959
GBP/SGD1.7711.7641.801
GBP/HKD10.2010.1710.45
GBP/CHF1.3141.3131.350
 timTim Clayton is a market analyst with more than 20 years of experience in the financial markets, with particular focus on currencies. Holds an economics degree from University of New York. Writes for multiple publications including Investing.com and SeekingAlpha so he is on top of all the happening in the world of currencies and macro-economics. 


Information expressed in this article and on MoneyTransferComparison.com as a whole does not constitute as financial advice. If you decide to make any actions based on the information you read, we shall not be held responsible.

 

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